Rent out or sell?!

milly_blue

Hi,

This is my first post! I am after some help - I'm in a bit of a dilemma and any thoughts/advice would be greatly received.
I own a house (approx 50%) but am really not happy with where I live at the moment and it was never the long term plan to stay there anyway (acquired mortgage in my mid-20s about 6 years ago).
I would like to buy a new house within the next year or so and have some inheritance to do this, my other half also has some savings (although not very significant). I don't know whether it would be best to rent out my current house and buy a new house. My only issues are; do i want to be a landlord?, I won't have loads of money to invest in a new house and therefore will i compromise on my life, it will be a squeeze for me and my partner if either of us lost our jobs or couldn't rent out the property. My other issue is the house next door keeps getting rented out and i have constant problems with the tenants (noise etc), which potentially means that any tenants i have will have the same issue. The landlord has let the property fall into disrepair as well and this will only get worse and potentially put people off buying or renting.
On the other hand I know that the property could be a good investment - but I just don't know whether for the meantime it would be better to invest in a more expensive property that i'm happy in with no other ties. We are also expecting a baby and so living in a good area etc is particularly important.
I don't know what to do for the best!
Any thoughts would be really helpful!

PasturesNew

I'd say sell and buy a house you want to live in. You can then get on with your lives, not worrying if the phone will ring and some maintenance/other issues need to be sorted/fixed/paid for .... not worry about voids .... not worry about the quality of your tenant .... etc etc etc.

Just get on with your lives in a carefree manner.

longtermplanner

You have seen the hassles of being a landlord by what has happened next door- tenants keep changing, problem tenants, need to maintain the property etc.

It sounds as though you have a busy life coming up, so I would suggest you should KISS and sell the house. Time and as little stress as possible is just as important to you and your partner over the next few years as money!

Guest101

Unless ur fully commited to being a LL I'd sell. It's not as easy as saying I have a house that's empty, it has responsibilities.

But if u decide on it, there's good advice on these forums. Have a read thru, the problems both LLs and tenants face, and the consequences are all here to see

BigAunty

Sell. You've already said you don't have the appetite to be a landlord, you are aware of the risks of repossession if you lose your jobs and there's a void period, and that you are likely to experience a turnover of tenants due to the neighbours (or in fact, your future tenants could well be a nuisance to other neighbours in the street).

alexanderalexander

To summarise the situation bluntly, in 20 years' time you'll almost certainly be a fair bit richer if you keep the house and let it out, but you have to decide whether you have it in you to do it.

One compromise option could be to keep your house and let it using a fully managed service from a decent letting agent (take local recommendations). You could re-mortgage the house to a 75% loan-to-value interest-only buy-to-let mortgage and use that the equity you've taken out to augment the deposit on your new house (all the mortgage interest payments on the rental property would be tax deductible).

You'd need to do some calculations first, however. What is the lettings market like in your area? Would the likely rent you receive comfortably cover the costs of a buy-to-let mortgage, maintenance and letting agent fees? If so, then you shouldn't be worried about the rental property constraining your new existence (in the current world of high yields and low interest rates, you could well end up with a nice little excess in your pocket every month).

But that said, you do still need to want to be a landlord even with an excellent letting agent -- the agent should deal with all day-to-day issues, but you'll still have to keep basic accounts and fill in a self-assessment form etc., and take strategic decisions about if/when to sell/upgrade/extend the house. And you'd still bear the risk of a default by a tenant. It's your choice -- if the sums stacked up, in your situation I'd definitely keep the house as a rental property, but I realise not everyone would want to.

allthingsmustpass

alexanderalexander wrote: »

To summarise the situation bluntly, in 20 years' time you'll almost certainly be a fair bit richer if you keep the house and let it out

Now theres a statement! The housing bubble we're still suffering from the consequences of will not be repeated in our lifetimes. Id take this with a pinch of salt OP.

I would sell and use the money to reduce your debt on the new house. The future is uncertain, incomes are not going to improve for the foreseeable future and you should guard against redundancy. A low mortgage payment on a lower debt is going to be a sensible choice.

alexanderalexander

allthingsmustpass wrote: »

Now theres a statement! The housing bubble we're still suffering from the consequences of will not be repeated in our lifetimes. Id take this with a pinch of salt OP.

I fear that taking this discussion much further would cause this thread to descend into the rather fruitless (but amusing) house price bull versus bear debates which take place on the "Debate House Prices & the Economy" forum, but I think even the most ardent "crashist" would be hard pushed to argue that house prices in 20 years' time will be lower than they are today in nominal terms.

(I should add that I am not myself a particular house price bull -- my view is that in many areas of the country in 20 years' time house prices may well be lower than they are today in real terms calculated against average incomes -- and that would be a good thing -- but it's almost impossible that they'd be lower in nominal terms).

allthingsmustpass

You said 'a fair bit richer' which you have now contradicted by saying 'house prices may well be lower than they are today in real terms'.

Being 'richer' is not defined in nominal terms, I didn't mention nominal values so I don't know where than came from but thanks for redacting your previous misleading statement.

alexanderalexander

allthingsmustpass wrote: »

You said 'a fair bit richer' which you have now contradicted by saying 'house prices may well be lower than they are today in real terms'.

Being 'richer' is not defined in nominal terms, I didn't mention nominal values so I don't know where than came from but thanks for redacting your previous misleading statement.

Not a contradiction or retraction. Any capital growth makes landlords richer; there is no need for the rate of capital growth to be higher than the rate of inflation for the landlord to be doing very nicely thank you.

allthingsmustpass

Umm. Well as a renter in these property bubble times I would like to take the opportunity to thank landlords such as yourself for your financial confusion as without it you wouldn't think subsidising my living costs was a good idea.

Keep up the good work!